Europe stocks rise after Europe, U.S. data

LONDON (MarketWatch) — European stocks rose Wednesday, finding support in euro-zone industrial data and a U.S. retail-sales report, while earnings reports from majors Société Générale SA and Heineken NV also drew attention.

The Stoxx Europe 600 index
SXXP, +0.03%
gained 0.4% to close at 288.27, adding to a 0.5% gain from Tuesday.

“At the moment, the rally seems to be built on early signs of a recovery and investors have moved back into risk assets fairly rapidly,” said Victoria Clarke, economist at Investec Securities.

“It’s difficult to see what will stop this run with things a lot quieter in Europe. There’s the Italian election [on Feb. 24-25], which could be a little blip, but I don’t see it as a show stopper,” she said.

For the broader European market, investors trained their attention on data showing industrial production in the euro zone rose 0.7% in December, beating expectations of a 0.3% rise.

“Industrial production rose across the euro area in December, but the increase follows steep falls in each of the previous three months and care should therefore be taken in interpreting this single data point as the start of a recovery,” said Chris Williamson, chief economist at Markit.

“The worry is that signs of improvements are by no means universal, and skewed heavily towards Germany. Of greatest concern is France, which appears to be bucking the wider trend and suffering an increased rate of decline at the start of 2013,” he said.

Bank of England inflation report

Closer to home, the Bank of England raised its forecast for inflation, signaling it will overshoot its 2% target over the two-year forecast period and said the economy is likely to post slow growth. BOE Governor Mervyn King further warned that tightening policy in an attempt to bring inflation to target posed the risk of “derailing the recovery.” See: BOE's King: Tighter policy could derail recovery.

The British pound slipped to a six-month low versus the dollar in the wake of the report.

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